Europe Green But Italy And Sub-Financials Underperforming

Tyler Durden's picture

Equity and credit markets in Europe followed the same-old-same-old path of a successful short-dated auction means buy-buy-buy and ended the day in the green today. A few things of note however stand out to us. First, the ramp in stocks/credit this time around is much less than last week's post-auction bliss which was also less than the prior week's post-auction squeeze higher. Second, there was a very notable dispersion between senior financials and subordinated financials credit today - with the spread between the two at almost 3 month wides. Third, Italy notably underperformed Spain today - by the largest in six weeks as the spread between these two is now back at 18bps, six-week tights and dramatically lower than the almost 50bps just a week ago. So while all may look rosy at the surface, we remain wider in spreads on the week and lower in stocks with all the real event risk ahead of us still.

Indicated by the 1-2-3 on the chart below, today's 'successful' Spanish bill-auction had less 'juice' to push stocks higher than the previous 2 auctions...

and we remain notably weaker from Friday's close - though notice the growing dispersion between senior (red) and subordinated (light blue) financial credit today...

Which leaves the spread between senior and subordinated credit at almost three-month wides...

and perhaps most importantly, Italy is starting to underperform Spain once again - quietly but surely drifting from nearly 50bps tighter to now only 18bps tighter in the last week or so - with today's underperformance (lower pane) the largest in six weeks...


Charts: Bloomberg

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Josephine29's picture

The problem for Italy is probably the bad economic news she got earlier. Take a look at how quickly real wages are falling there now from this article I read earlier today.


Real Wages are falling in Italy too

Today the Italian statistics office has told us this.

In March 2012 both the hourly wage index and the per employee index were unchanged compared to the previous month. Compared with March 2011 both the hourly wage index and the per employee index increased by 1.2 per cent.

So compared to a year ago (nominal) wages have risen by 1.2% so if we want a measure of real wages we need to look at inflation measures for a guide. If we use the European standard measure the snappily named Harmonised Index of Consumer Prices or HICP we see this.

In March 2012 the EU Harmonized Index of Consumer Prices HICP rose by 2.5% compared to the previous month and by 3.8% in comparison to the same month of the previous year.

So over the last year prices have risen by 3.8% and wages have risen by 1.3% so real wages have fallen by 2.5% in terms of their purchasing power. No wonder Italian consumers have got less optimistic!

SheepDog-One's picture

Quick everyone run back into Yurpean stocks! All is well again! 

stocktivity's picture

If I owned Apple on the day earnings were due, I'd be a little worried to see it way down on a day the market is way up.  Oh wait!  Insider trading is forbidden.  Silly me.

virgilcaine's picture

US "mkts" will be red at the close.

WhyDoesItHurtWhen iPee's picture



The word of the day "European"

Now lets use it in a sentence.

"Hey, cut it out, yur a pee in down my leg and telling me its raining."

ArrestBobRubin's picture

Riiiiiiight... On what possible basis would eurozone stocks be up?

Dontcha just love the "Free Markets" here in the World the Illuminazi's Created?

virgilcaine's picture

Selling in the tarnished aapl is bruutal.  !  Margin calls galore.

falak pema's picture

If europe goes keynesian big time, we shall be in a North korean economy for long time; as all fiat reserve currency will be frozen as will be the market. Deep freeze, no market squeeze, print and print and let controlled inflation allow the Oligarchy to net its structural debts in a command economy. If the world's five continents manage that it will be the first time in the history of humanity. 

Krugman's wet dream to beat that of his mentor JM Keynes! 

Only problem : human nature and the devil in the detail ! The fall of all grand schemes and Caesar's dreams!